The Business Benefits of Estrogen

It’s well-known that I prefer index funds over any actively managed fund, but I read a couple of studies that showed women fund managers perform better than their male counterparts. So I decided to do some research on the subject and I found out some interesting facts on estrogen and testosterone. Here’s what I found…

Few will deny that women view money, risk and investing differently than men. Picking money managers on the basis of gender was not a major issue in the past as the mutual fund industry had been traditionally dominated by men. But nowdays, increasingly there are more and more women managing money on behalf of others.

Research has shown that female fund managers have more stable investing styles and are less likely to trade. One study (Bliss and Potter 2002) showed that both US and international women fund managers obtained higher raw returns.

Years spent bargain hunting has made us better shoppers. Statistics from the National Association of Investors Corporation show that from 1981 through 1996, women-only investing clubs earned a 21.3% average annual return while men-only clubs lagged at 15%.

On the executive management front the story is the same. Having women in the Board Room brings more perspectives on issues like risk and looking at new markets. A 2008 study (Krishnan and Parsons) found that companies with more women in senior management are more profitable and have higher stock returns after initial public offerings than those with fewer women in the management ranks. The findings suggest that the improved bottom line for companies with more women senior executives is not produced through the management of earnings or lower quality earnings. Instead, earnings quality is positively associated with gender diversity in senior management.

Now I’m not drawing any conclusions, but it does make one think why…Could we be just be savvier consumers all around, from clothes to investing to running companies? Or are we simply more thorough, only making decisions after gathering all the information we can? We know that increasing testosterone also increases the willingness to be riskier.

But it does make one think whether the economic meltdown might not have been as severe if more women were in the executive suites on Wall Street…